Adeno-associated virus type 2 (AAV) is a human parvovirus which usually requires adenovirus or herpesvirus as a helper to replicate and is not pathogenic. In the absence of helper virus, AAV DNA integrates into the host genome with a strong preference for a region of chromosome 19. The AAV rep gene open reading frame encodes four overlapping Rep proteins. Rep68 and Rep78 bind specifically to the AAV genome's inverted terminal repeats (ITRs), have enzymatic activities which are necessary for the resolution of AAV hairpin termini into linear DNA, and regulate AAV gene expression. We have expressed wild-type and mutant Rep proteins from recombinant baculoviruses in insect cells, a rabbit reticulocyte transcription-translation system, or the HIV-1 long terminal repeat promoter in human 293 cell transient transfections. Several parts of the Rep coding region have been identified as being necessary for the various Rep functions. In particular, we have identified a domain within the amino-terminal portion of the Rep78 and Rep68 proteins which can direct binding to the AAV ITRs. We have also demonstrated the repression of AAV RNA levels by Rep proteins. We have identified a binding site for Rep proteins near the chromosome 19 integration site. This implies a role for Rep proteins in directed integration. Further study of this phenomenon may lead to the development of AAV-based gene therapy vectors with site-specific integration. We have developed a gene delivery system based on (AAV) for potential gene therapy of cystic fibrosis (CF). A truncated version of the cystic fibrosis transmembrane conductance regulator cDNA flanked by the AAV ITRs, which is efficiently packaged into AAV capsids, corrected the CF chloride channel defect in a tissue culture cell line derived from lung cells of a cystic fibrosis patient. We have also discovered a cryptic promoter within the AAV terminal repeats. Using the ITR promoters, larger genes than previously thought possible can be packaged into AAV vectors.